HONG KONG. A shocking weekend of protest and violence in Hong Kong has luxury brands and travel retailers counting both the immediate cost of the ongoing demonstrations and worrying about the longer-term repercussions.
The streets of Hong Kong – usually the scene of a thriving duty free and duty paid luxury shopping industry – have been the site for protests every weekend since early June as Hong Kong residents voice their outrage over a controversial new extradition law.
“Three weeks ago I met with the tourism sector and they expected a 5 to 10% impact, but now the hotel sector is worried the impact would be larger” – Commerce and Economic Development Secretary Edward Yau (Source: Reuters)
Critics of the proposed law have said it threatens the special administrative region’s status as a safe haven for critics of the Chinese government. After several protests, Hong Kong Chief Executive Carrie Lam promised on 15 June to indefinitely suspend passing the law, but not totally abandon the legislation. This has not satisfied the protesters, who have continued taking to the streets of Hong Kong in their hundreds of thousands, culminating in this weekend’s mob attacks on the protesters.
In the wake of the earlier protests, the Hong Kong Retail Management Association (HKRMA) issued a statement saying that sales dropped significantly year-on-year during June and the first week of July. The association added that it was expecting a double-digit year-on-year drop in sales in July, August and 2019 as a whole.
The HKRMA said it was concerned that the incidents will seriously impact Hong Kong’s international image as a safe and world-class tourist and shopping destination.
“The protests have affected the daily life of Hong Kong people and our business environment. HKRMA urges the government to handle the situation swiftly and to return calmness to the society as soon as possible.”
Research from Bloomberg Intelligence has predicted that rents could drop as much as 3% in the year to March 2020 due to reduced foot traffic in retail hotspots such as Central and Causeway Bay.
DFS Group has two T Gallerias in Kowloon and a T Galleria Beauty in Causeway Way on Hong Kong Island. Dufry operates duty free stores in the new West Kowloon railway station linking Hong Kong with Mainland China. Dufry’s team in Hong Kong told The Moodie Davitt Report that its stores had not been affected by the protests or forced to close at any time. DFS’s controlling shareholder LVMH will issue its quarterly results later this week and it will be interesting to see how the group refers to any commercial impact on both its luxury brand portfolio and DFS.
Richemont last week became the latest luxury company to say the protests had impacted performance. For the quarter ended 30 June, it noted that sales in Hong Kong had retreated, driven by the relative strength of the Hong Kong Dollar and the recent street protests.
The protests have also had a knock-on effect on flight bookings from Asia to Hong Kong International Airport – home to high-profile concessions from the CDF-Lagardère joint venture and The Shilla Duty Free and a host of luxury brands – according to ForwardKeys. The flight bookings analyst said flight bookings to Hong Kong from Asia had dropped -5.4% year-on-year in the four-week period from 16 June-13 July.
ForwardKeys Vice President of Insights Olivier Ponti commented: “Whilst the numbers do not look good, things are not all bad for Hong Kong’s visitor economy. So far, the adverse media coverage of the demonstrations has not caused an overall decline in long-haul bookings to Hong Kong and the number of Asian bookings made in 2019 is still ahead of those made during the same time period in 2018, although growth has slowed substantially since the mass protest of 16th June.”
However, ForwardKeys added that bookings were suffering with each weekend of protests. This will not have been aided by yesterday’s (21 July) protests, which ended with police firing teargas and masked men attacking protesters on a train.
